New Delhi, Sep 12 (IANS): While inflation abated mildly in August, data released Friday showed industrial output was flat in July pointing to the need for a rate cut by the Reserve Bank of India to spur industrial activity.

Industrial activity, measured in terms of the Index of Industrial Production (IIP), grew 0.5 percent in the month of July over the same month of the previous year, government data showed.

India's retail inflation slowed down to 7.8 percent in August from 7.96 percent in the previous month.

The July industrial growth compares unfavourably with the 3.9 percent recorded in the previous month, the Central Statistics Office data showed.

The cumulative growth for the period April-July of fiscal 2014 -15 over the corresponding period of the previous year stands at 3.3 percent.

The drop in July is mainly due to the lower output in consumer goods.

Consumer goods output contracted by 7.4 percent year-on-year, while consumer durables output declined by 20.9 percent. Consumer non-durables, however, grew 2.9 percent compared to 0.1 percent month-on-month.

While manufacturing activity contracted 1 percent, as against the growth of 1.8 percent in the previous month, the mining sector recorded 2.1 percent growth versus 4.3 percent.

The cumulative growth during April-July 2014-15 over the corresponding period of 2013-14 has been 2.8 percent in mining, 2.3 percent in manufacturing and 11.4 percent in electricity.

Retail inflation based on Consumer Price Index (CPI) slowed down to 7.8 percent in August from 7.96 percent in the previous month, helped by slower increases in fuel, light and clothes prices, government data showed here Friday.

The CPI urban inflation stood at 7.04 percent in August, while CPI rural inflation was at 8.35 percent.

Retail food inflation rose to 9.42 percent in August compared to 9.36 percent in July.

For rural areas, retail food inflation was recorded at 9.83 percent, while for urban areas it stood at 8.40 percent, according to data released by the Central Statistics Office.

Commenting on the data, industry chamber FICCI president Sidharth Birla said in a statement: "While we were hoping that slowdown in manufacturing had bottomed out, it appears from July numbers that manufacturing may not out be out of the woods."

"It is worrying that deceleration in July is somewhat broad based extending to consumer durables and capital goods," he added.